Gov. Bill Lee wants federal funds to go toward the unemployed, closed businesses and “backfilling” lost revenue. But federal rules don’t allow the funds to go toward filling holes in the budget caused by the COVID-19 crisis.

The governor and Butch Eley, commissioner of Finance and Administration, believe a large portion of the $2.6 billion expected to flow to Tennessee’s coffers from the Coronavirus Aid, Relief, and Economic Security Act (CARES) Act should go to help bolster the unemployment insurance trust fund, which had $1.2 billion at the outset of the crisis.

Eley warned if the fund drops below $1 billion, the state might be forced to raise the business tax used to fund the program. In fact, Lee and Eley said the entire fund could be drained if unemployment continues at the current rate, with some 433,000 people filing claims.

Tennessee already is facing a nearly $700 million shortfall in tax revenues for April, largely because of an extension for filing taxes. Eley said Congress is considering changing the rules to allow states to use the CARES Act funds to offset revenue shortfalls. The governor suggested some of the funds be set aside in case the state is allowed to “backfill” revenue shortfalls. But if the state uses the money incorrectly, the U.S. Treasury Department could force it to repay some of the funds.